-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PQt4o7Ucjo2n5eJc4WevPCEeLsGF/3BT9Sc8lo8jn5WL8T94mva+KIsCSefdMHhc EhgmrAU6i09puFecqSoVBg== 0000927016-98-003121.txt : 19980817 0000927016-98-003121.hdr.sgml : 19980817 ACCESSION NUMBER: 0000927016-98-003121 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBRIDGE TECHNOLOGY PARTNERS MASSACHUSETTS INC CENTRAL INDEX KEY: 0000895462 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 061320610 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21040 FILM NUMBER: 98688545 BUSINESS ADDRESS: STREET 1: 304 VASSAR ST CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6173749800 MAIL ADDRESS: STREET 1: 304 VASSAR ST CITY: CAMBRIDGE STATE: MA ZIP: 02139 10-Q 1 FORM 10-Q ================================================================================ FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ COMMISSION FILE NUMBER 0-21040 CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. (Exact name of registrant as specified in its charter) DELAWARE 06-1320610 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 304 VASSAR STREET, Cambridge, Massachusetts 02139 (Address of principal executive offices) (Zip Code) (617) 374-9800 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of July 31, 1998, there were 56,768,796 shares of common stock outstanding. ================================================================================ CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. TABLE OF CONTENTS ----------------- PART I - FINANCIAL INFORMATION: ITEM 1: FINANCIAL STATEMENTS Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1998 and 1997 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 PART II - OTHER INFORMATION: ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16 ITEM 5: OTHER INFORMATION 16 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 17 SIGNATURES 18 EXHIBIT INDEX 19 2 CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)
June 30, December 31, 1998 1997 ----------- ------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 51,683 $ 39,496 Investments held to maturity 21,712 15,824 Accounts receivable, less allowance of $3,486 and $2,607 at June 30, 1998 and December 31, 1997, respectively 134,203 101,887 Unbilled revenue on contracts 9,687 8,231 Deferred income taxes 950 950 Prepaid expenses and other current assets 36,699 27,733 -------- -------- Total current assets 254,934 194,121 Property and equipment, net 41,975 35,403 Other assets 6,518 5,624 Goodwill, net 1,675 2,094 -------- -------- Total assets $305,102 $237,242 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 18,574 $ 18,998 Accrued expenses 47,373 36,235 Deferred revenue 14,356 9,502 Income taxes payable 21,983 19,361 Obligations under capital leases, current 127 143 Other current liabilities - 1,952 -------- -------- Total current liabilities 102,413 86,191 Obligations under capital leases 225 341 Deferred income taxes 923 923 Commitments and contingencies Stockholders' equity: Common stock, $.01 par value, authorized 250,000,000 shares; issued and outstanding 56,571,122 and 54,969,004 at June 30, 1998 and December 31, 1997, respectively 566 550 Additional paid-in capital 102,788 75,253 Retained earnings 102,084 76,445 Accumulated other comprehensive loss (3,897) (2,461) -------- -------- Total stockholders' equity 201,541 149,787 -------- -------- Total liabilities and stockholders' equity $305,102 $237,242 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
Three Months Ended June 30, Six Months Ended June 30, ---------------------------- -------------------------- 1998 1997 1998 1997 --------- ---------- --------- --------- Net revenues $146,330 $96,526 $279,816 $178,748 Costs and expenses: Project personnel 65,156 43,444 125,177 79,864 General and administration 16,307 11,462 31,288 20,888 Sales and marketing 14,670 8,514 27,143 16,420 Other costs 28,098 18,506 54,410 33,930 -------- ------- -------- -------- Total operating expenses 124,231 81,926 238,018 151,102 -------- ------- -------- -------- Income from operations 22,099 14,600 41,798 27,646 Other income (expense): Interest income 571 659 1,173 1,001 Interest expense (38) (43) (83) (76) Foreign exchange (loss) gain (24) 36 (157) 5 -------- ------- -------- -------- Income before income taxes 22,608 15,252 42,731 28,576 Provision for income taxes 9,043 6,131 17,092 11,501 -------- ------- -------- -------- Net income $ 13,565 $ 9,121 $ 25,639 $ 17,075 ======== ======= ======== ======== Basic net income per share $ .24 $ .17 $ .46 $ .32 ======== ======= ======== ======== Diluted net income per share $ .22 $ .16 $ .42 $ .30 ======== ======= ======== ======== Weighted average number of common shares outstanding 56,306 52,544 55,901 52,274 ======== ======= ======== ======== Weighted average number of common and common equivalent shares outstanding 61,723 58,079 61,334 58,008 ======== ======= ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 4 CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Six Months Ended June 30, --------------------------- 1998 1997 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 25,639 $ 17,075 Amounts that reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,268 3,637 Tax benefit from exercise of stock options 10,189 4,984 Changes in assets and liabilities: Increase in accounts receivable (32,640) (26,434) (Increase) decrease in unbilled revenue on contracts (1,545) 848 Increase in prepaid expenses and other current assets (9,063) (2,303) (Decrease) increase in accounts payable (408) 4,968 Increase in accrued expenses 9,968 9,717 Increase in deferred revenue 4,846 7,890 Increase in income taxes payable 2,591 2,867 Other, net (875) (1,671) -------- -------- Net cash provided by operating activities 14,970 21,578 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (12,520) (10,439) Purchase of investments held to maturity (13,557) (9,255) Maturity of investments 7,669 7,511 -------- -------- Net cash used for investing activities (18,408) (12,183) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of loan (823) - Obligations under capital leases (121) (33) Dividend distribution (1,129) (1,817) Proceeds from employee stock purchase plan 3,390 2,140 Proceeds from exercise of stock options 13,972 4,564 -------- -------- Net cash provided by financing activities 15,289 4,854 -------- -------- Effect of foreign exchange rate changes on cash 336 (235) Net increase in cash and cash equivalents 12,187 14,014 Cash and cash equivalents at beginning of period 39,496 26,087 -------- -------- Cash and cash equivalents at end of period $ 51,683 $ 40,101 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 5 CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) A. BASIS OF REPORTING ------------------ The accompanying consolidated financial statements of Cambridge Technology Partners (Massachusetts), Inc. (the "Company") include the accounts of the Company and all of its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In November 1997, the Company acquired all of the outstanding capital stock of Peter Chadwick Holdings Limited ("Peter Chadwick"). The acquisition of Peter Chadwick was accounted for using the pooling of interests method of accounting. All prior period historical consolidated financial statements presented herein have been restated to include the financial position, results of operations, and cash flows of Peter Chadwick. Certain prior period amounts have been reclassified to conform to current period presentation. In the opinion of management, the consolidated financial statements reflect all normal and recurring adjustments, which are necessary for a fair presentation of the Company's financial position, results of operations, and cash flows as of the dates and for the periods presented. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Consequently, these statements do not include all the disclosures normally required by generally accepted accounting principles for annual financial statements nor those normally made in the Company's Annual Report on Form 10-K. Accordingly, reference should be made to the Company's Annual Report on Form 10-K for additional disclosures, including a summary of the Company's accounting policies. The consolidated results of operations for the three and six months ended June 30, 1998, are not necessarily indicative of results for the full year. B. REVOLVING CREDIT FACILITY ------------------------- In June 1998, the Company obtained a commitment from The Chase Manhattan Bank ("Chase") to provide a $50.0 million unsecured senior revolving credit facility (the "Facility") through a syndication arrangement. The Facility, which is expected to be in place by August 31, 1998, expires three years from its closing date and replaces the Company's previously maintained $20.0 million revolving credit facility that expired on June 30, 1998. The Facility will be administered by Chase and will carry a commitment fee, payable quarterly in arrears, calculated based on the unused portion of the Facility and a price grid as set forth in the credit agreement currently under negotiation with Chase. The Facility will permit the Company to elect any of three possible interest rate formulas as defined in the credit agreement. Interest will be payable in arrears based on an interest period determined by the interest rate elected by the Company. The Facility will require, among other things, the Company to maintain certain financial ratios, including debt service coverage, debt to capital, and net worth. At June 30, 1998 and December 31, 1997, the Company had no balance outstanding under its revolving credit facility. C. OTHER CURRENT LIABILITIES ------------------------- In April 1997, Peter Chadwick acquired the assets of a training facility located in the United Kingdom. Peter Chadwick entered into a loan agreement with National Westminister Bank (the "Loan Agreement") to finance this acquisition. In March 1998, the Company terminated this Loan Agreement and repaid the outstanding principal balance of approximately $823,000. D. NET INCOME PER SHARE -------------------- The Company adopted Statement of Financial Accounting Standard No. 128, "Earnings per Share," ("SFAS 128") beginning with the year ended December 31, 1997, which includes retroactively restating 6 earnings per share for all prior periods for which earnings per share ("EPS") data is presented. SFAS 128 requires the presentation of basic and diluted EPS. Basic net income per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income per share is computed using the weighted average number of common shares outstanding plus the dilutive effect of common stock equivalents (using the treasury stock method). The following table presents the calculation of earnings per share for the three and six months ended June 30, 1998 and 1997 (in thousands except per share data):
Three Months Ended Six Months Ended ----------------------- ---------------------- 1998 1997 1998 1997 ------- ------ ------- ------- Net income $13,565 $ 9,121 $25,639 $17,075 ======= ======= ======= ======= Basic: Weighted average common shares outstanding 56,306 52,544 55,901 52,274 ======= ======= ======= ======= Net income per share $ .24 $ .17 $ .46 $ .32 ======= ======= ======= ======= Diluted: Weighted average common shares outstanding 56,306 52,544 55,901 52,274 Dilutive effects of stock options and warrants 5,417 5,535 5,433 5,734 ------- ------- ------- ------- Weighted average common and common equivalent shares outstanding 61,723 58,079 61,334 58,008 ======= ======= ======= ======= Net income per share $ .22 $ .16 $ .42 $ .30 ======= ======= ======= =======
E. FOREIGN EXCHANGE CONTRACTS -------------------------- The Company maintains foreign exchange contracts to mitigate the risk of changes in foreign exchange rates associated with intercompany balances. The contracts generally have maturities of one month. The impact of exchange rate movements on contracts is recorded in other income in the period in which the exchange rates change, generally consistent with the term of the contract. As of June 30, 1998, the Company held foreign exchange forward contracts of approximately $10.2 million and there were no related deferred gains and losses. The Company does not hold foreign exchange contracts for trading purposes. F. COMPREHENSIVE INCOME -------------------- The Company has adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires the presentation of comprehensive income and its components. Comprehensive income presents a measure of all changes in equity that result from recognized transactions and other economic events during the period other than transactions with stockholders. SFAS 130 requires restatement of all prior period financial statements presented and is effective for the periods beginning after December 15, 1997. The Company has elected to disclose this information in its annual Statement of Stockholders' Equity. The following table presents the calculation 7 of comprehensive income and its components for the three and six months ended June 30, 1998 and 1997 (in thousands):
Three Months Ended Six Months Ended ------------------- -------------------- 1998 1997 1998 1997 --------- -------- --------- --------- Comprehensive income: Net income $13,565 $9,121 $25,639 $17,075 Foreign currency translation adjustments 237 (849) (1,436) (2,024) ------- ------ ------- ------- Comprehensive income $13,802 $8,272 $24,203 $15,051 ======= ====== ======= =======
G. NEW ACCOUNTING PRONOUNCEMENTS ----------------------------- In March 1998, Statement of Position 98-1, "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"), was issued. SOP 98-1 provides guidance on applying generally accepted accounting principles in addressing whether and under what condition the costs of internal-use software should be capitalized. SOP 98-1 is effective for transactions entered into in fiscal years beginning after December 15, 1998, however earlier adoption is encouraged. The Company adopted the guidelines of SOP 98-1 as of January 1, 1998. In July 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal years beginning after December 15, 1997. Interim reporting disclosures are not required in the first year of adoption. SFAS 131 specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be disclosed. SFAS 131 changes current practice under SFAS 14 by establishing a new framework on which to base segment reporting and expands the required disclosures for each segment. The Company will adopt SFAS 131 in the fourth quarter of 1998 and is currently determining the impact of such adoption on its reporting as currently presented. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded for each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company is currently determining the impact of the adoption of SFAS 133 on the Company's results of operations and financial position. 8 CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Cambridge Technology Partners (Massachusetts), Inc. (the "Company") is an international management consulting and systems integration firm. The Company combines management consulting, information technology ("IT") strategy, process innovation and implementation, custom and package software deployment, network services, and educational services to rapidly deliver end-to-end business systems for clients. In performing its services, the Company employs a rapid development methodology that features an iterative approach and conducts facilitated workshops that bring together key client users, executives, and IT professionals to achieve consensus on the business case, strategic objectives, and functionality of a business solution. The Company believes that this approach permits the delivery of results in unprecedented time frames, typically within three to twelve months. Working primarily with a fixed-price, fixed- timetable model with client involvement at all stages of the process, the Company continued to post strong operating results for the quarter ended June 30, 1998. Net revenues for the second quarter of 1998 increased 52% to $146.3 million compared to $96.5 million for the same period in 1997, reflecting increased demand for the Company's services worldwide. Net income for the quarter ended June 30, 1998, increased 49% to $13.6 million, or $.22 per share (diluted) compared to $9.1 million, or $.16 per share (diluted) for the comparable period in 1997. In the second quarter of 1998, the Company continued to experience increased demand for its services worldwide. North American net revenues grew 54% for the quarter ended June 30, 1998, compared to the same period in 1997. This growth in North American net revenues was fueled by increased demand across all geographic areas for the Company's services, including custom and package client/server applications, enterprise resource planning ("ERP") solutions, management consulting services, and interactive solutions. Internationally, net revenues grew 47% in the second quarter of 1998 compared to the same period a year ago. In the second quarter of 1998, the Company commenced approximately 230 new engagements worldwide. In order to support the increased demand for the Company's services, total company headcount increased to 3,487 at June 30, 1998, from 3,071 at December 31, 1997. The Company will continue to focus on hiring and assimilating appropriate personnel to service its clients in the upcoming quarters of 1998. While the Company's employee turnover has increased to an annualized rate of 25% in 1998 from 23% in 1997, the Company expects that this increase should not have a detrimental impact on the Company's ability to meet its growth goals. The Company is continuing to hire in accordance with its current and anticipated demand requirements and had 178 offers of employment accepted as of July 31, 1998 for 1998 start dates. In the second quarter of 1998, the Company generated an increased number of cross business unit engagements, particularly driven by the Company's most recent acquisition, Peter Chadwick. Demand for the Company's ERP business remained strong in the second quarter of 1998 as the Company continued to grow its Cambridge Momentum (SM) service offerings. The Company also developed and introduced a rapid, fixed-time/fixed-price ERP deployment strategy for middle- market organizations in the first quarter of 1998. Customer response to these new service offerings has been positive. During the first half of 1998, the Company strengthened its operations in Europe by adding offices in Copenhagen, Denmark, Utrecht, Netherlands, Brussels, Belgium, and Paris, France, bringing worldwide total office count to 49 locations at June 30, 1998. Committed to investing in the global expansion of the Company, management believes that the Company is well positioned for business growth going into the third quarter of 1998. 9 RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1998, COMPARED TO THREE MONTHS ENDED JUNE 30, 1997 Net revenues increased 52% to $146.3 million in 1998 compared to $96.5 million in 1997 due principally to an increase in the volume of services delivered to new clients, leveraging the existing client base by undertaking additional projects, and increased demand for expanded service offerings. North American net revenues remained strong, growing 54% to $99.5 million in 1998 from $64.7 million in 1997. International net revenues grew 47% to $46.8 million in 1998 from $31.8 million in 1997. International net revenue results were negatively impacted by the strengthening of the U.S. dollar against international currencies. Excluding an $887,000 negative impact related to changes in foreign exchange rates, consolidated net revenues for the quarter ended June 30, 1998, would have been $147.2 million, or a 53% increase in net revenues compared to the same period in 1997. Project personnel costs consist principally of payroll and payroll related expenses for personnel dedicated to client assignments and are directly related to the level of client services being delivered. Project personnel costs were $65.2 million in 1998 and $43.4 million in 1997, or 45% of net revenues for both periods. The dollar increase resulted from the hiring of additional project personnel over 1997 staff levels to support the increased volume of services delivered to clients and the related increase in payroll and payroll related expenses. Worldwide project personnel headcount increased 33% to 2,868 employees at June 30, 1998, from 2,162 employees at June 30, 1997. While the Company anticipates meeting its hiring goals for the remainder of fiscal 1998, competition for personnel with IT skills is intense and the Company expects salaries and wages to continue to increase. The Company periodically reviews and updates its billing rates to cover the expected increase in costs. The Company currently expects that project personnel costs as a percentage of net revenues will increase to approximately 46% for the remainder of 1998 as the Company invests in hiring and assimilating its employees to support its business growth. Furthermore, in January 1998, the Company introduced staffing control initiatives to better monitor its subcontractor costs. While subcontractor costs continued to be a notable component of project personnel costs, subcontractor costs were reduced in the first and second quarters of 1998 compared to the third and fourth quarters of 1997 and were within management's expectations. Other initiatives that are part of the Company's focus on containing project personnel costs include the continuous review and measurement of utilization, employee retention, and billability. In January 1998, the Company implemented an improved worldwide time entry system to serve as the basis for its productivity measurements. General and administration expenses were $16.3 million or 11% of net revenues in 1998 compared to $11.5 million or 12% of net revenues in 1997. The percentage decrease from 1997 is primarily due to the significant increase in net revenues and the Company's continued focus on cost containment in this area. The dollar increase reflects expenses associated with increased staff headcount to support the Company's continued growth and geographic expansion in North America and internationally. The Company currently expects to decrease its general and administration expenses as a percentage of net revenues to approximately 10% for the remainder of 1998, while continuing to provide sufficient support for the Company's global growth strategy. Sales and marketing expenses were $14.7 million or 10% of net revenues in 1998 compared to $8.5 million or 9% in 1997. The dollar and percentage increase are primarily attributable to an increase in payroll and payroll related expenses associated with the increase in sales and marketing personnel from 10 165 at June 30, 1997, to 262 at June 30, 1998, the increase in sales commissions related to the significant increase in net revenues, and travel related expenses for the field sales and marketing groups. This increased headcount enables the Company to maximize potential client lead generation through its regional field marketing staff with subsequent services coordinated by its sales personnel. The dollar increase also resulted from increased participation in trade shows and marketing publications in order to provide existing and potential clients with essential information about the Company and its existing and new service offerings. The Company continued its investment in marketing initiatives and educational and training programs through those conducted by its Management Lab and the Cambridge Information Network (CIN). The Management Lab and CIN enable clients to participate in both physical and virtual interactive forums to discuss issues associated with adopting advanced information technology, as well as key business, technology, and career management issues. The Company expects to leverage its investment in sales and marketing expenditures made in the first half of 1998, and thus anticipates an improvement as a percentage of net revenues in this area. The Company expects its sales and marketing expenses as a percentage of net revenues to decrease to approximately 9% for the remainder of 1998. Other costs consist of non-billable expenses directly incurred for client projects and other associated business costs, including facilities costs and related expenses, non-billable staff travel, and staff training. Other costs were $28.1 million in 1998 and $18.5 million in 1997, or 19% of net revenues for both periods. The dollar increase from 1997 resulted principally from increased facility, travel, and employee training costs. As the Company continues its headcount and facilities growth to support current and anticipated increases in demand for its services, the Company expects to maintain other costs as a percentage of net revenues at approximately 19% for the remainder of 1998. Interest income decreased to $571,000 in 1998 from $659,000 in 1997. The 1997 amount included a $188,000 one-time gain from the sale of an investment. The Company's cash and investments consist primarily of tax exempt investment grade municipal bonds which mature within one year from the date of purchase, overnight repurchase agreements, and short-term commercial paper. Foreign exchange loss was $24,000 in 1998 compared to a gain of $36,000 in 1997. Foreign exchange gains and losses were related to foreign currency exchange rate fluctuations associated with intercompany balances. The Company maintains monthly foreign exchange forward contracts to hedge against the risk of changes in foreign exchange rates associated with intercompany balances. This risk coverage is dependent upon forecasted intercompany activities at the beginning of each month. The exchange rate gains and losses are directly related to the accuracy of such forecasted amounts. As of June 30, 1998, the Company held foreign exchange contracts of approximately $10.2 million. The Company's effective income tax rate in 1998 was 40.0% compared to 40.2% a year ago. The Company's effective tax rate may vary from period to period based on the Company's future expansion into areas of varying country, state, and local statutory income tax rates. Net income was $13.6 million or $.22 per share (diluted) for the 1998 period as compared to $9.1 million or $.16 per share (diluted) for the same period in 1997. The Company increased its net income per share by 38% despite a 6% increase in the number of common and common equivalent shares outstanding, primarily due to stock options granted to employees and shares issued under the employee stock purchase plan. 11 SIX MONTHS ENDED JUNE 30, 1998, COMPARED TO SIX MONTHS ENDED JUNE 30, 1997 Net revenues increased 57% to $279.8 million in 1998 compared to $178.8 million in 1997 due principally to an increase in the volume of services delivered to new clients, leveraging the existing client base by undertaking additional projects, and increased demand for expanded service offerings. North American net revenues remained strong, growing 60% to $192.3 million in 1998 from $120.5 million in 1997. International net revenues grew 50% to $87.5 million in 1998 from $58.3 million in 1997. International net revenue results were negatively impacted by the strengthening of the U.S. dollar against international currencies. Excluding a $1.9 million negative impact related to changes in foreign exchange rates, consolidated net revenues for the quarter ended June 30, 1998, would have been $281.7 million, or a 58% increase in net revenues compared to the same period in 1997. Project personnel costs were $125.2 million in 1998 and $79.9 million in 1997, or 45% of net revenues for both periods. The dollar increase resulted from the hiring of additional project personnel over 1997 staff levels to support the increased volume of services delivered to clients and the related increase in payroll and payroll related expenses. Average worldwide project personnel for the six-month period ended June 30, 1998, increased 43% from the comparable period in 1997. General and administration expenses were $31.3 million or 11% of net revenues in 1998 compared to $20.9 million or 12% of net revenues in 1997. The percentage decrease from 1997 is primarily due to the significant increase in net revenues and the Company's continued focus on cost containment in this area. The dollar increase reflects expenses associated with increased staff headcount to support the Company's continued growth and geographic expansion in North America and internationally. Sales and marketing expenses were $27.1 million or 10% of net revenues in 1998 compared to $16.4 million or 9% in 1997. The dollar and percentage increase are primarily attributable to an increase in payroll and payroll related expenses associated with a 60% increase in average sales and marketing personnel in the first half of 1998, compared to the same period in 1997, the increase in sales commissions related to the significant increase in net revenues, and travel related expenses for the field sales and marketing groups. This increased headcount enables the Company to maximize potential client lead generation through its regional field marketing staff with subsequent services coordinated by its sales personnel. The dollar and percentage increase also resulted from increased participation in trade shows and marketing publications. Other costs were $54.4 million in 1998 and $33.9 million in 1997, or 19% of net revenues for both periods. The dollar increase from 1997 resulted principally from increased facility, travel, and employee training costs. Interest income increased to $1.2 million in 1998 from $1.0 million in 1997. The increase reflects growth in cash and investment balances in 1998 compared to 1997. The Company's cash and investments consist primarily of tax exempt investment grade municipal bonds which mature within one year from the date of purchase, overnight repurchase agreements, and short-term commercial paper. Foreign exchange loss was $157,000 in 1998 compared to a gain of $5,000 in 1997. Foreign exchange gains and losses were related to foreign currency exchange rate fluctuations associated with intercompany balances. The foreign exchange loss in 1998 is due primarily to unfavorable fluctuations in European and Latin American currencies in 1998. 12 The Company's effective income tax rate in 1998 decreased to 40.0% from 40.2% a year ago. The Company's effective tax rate may vary from period to period based on the Company's future expansion into areas of varying country, state, and local statutory income tax rates. Net income was $25.6 million or $.42 per share (diluted) for the 1998 period compared to $17.1 million or $.30 per share (diluted) for the same period in 1997. The Company increased its net income per share by 40% despite a 6% increase in the number of common and common equivalent shares outstanding, primarily due to stock options granted to employees and shares issued under the employee stock purchase plan. LIQUIDITY AND CAPITAL RESOURCES The Company continued to operate primarily debt-free and enhance its working capital position. Working capital increased to $152.5 million at June 30, 1998, from $107.9 million at December 31, 1997. This increase was primarily due to increases in accounts receivable, prepaid expenses and other current assets, proceeds from exercise of stock options, and proceeds from shares issued under the employee stock purchase plan, partially offset by cash used for capital expenditures related to office expansions and computer equipment for new employees and increases in accrued expenses, deferred revenue, and income taxes payable. The Company's days sales in accounts receivable was 78 days during the second quarter of 1998 compared to 77 days for the same period in 1997. The increase in days sales in accounts receivable in 1998 is primarily due to the timing of certain major receivable balances which were collected in the first two weeks of July. In 1998, the Company began to include the reduction in days sales outstanding as an individual metric for its employee bonus program. In addition, the Company's treasury function, which is primarily responsible for worldwide collection and cash management efforts, continues to focus on its outstanding receivables by involving the Company's project management staff in the collection process. Net cash provided by operating activities was $15.0 million in 1998 compared to $21.6 million for the comparable period in 1997. The increases in net income and tax benefit from exercise of stock options, were more than offset by the increases in accounts receivable, unbilled revenue on contracts, and prepaid expenses and other current assets and a decrease in accounts payable. Capital expenditures of $12.5 million in 1998 were used principally for computer equipment to support the Company's expanding operations and employee workstations and leasehold improvements related to the Company's expanding and opening of new offices worldwide. Capital expenditures for 1998 are expected to approximate $25.0 million, principally for leasehold improvements, personal computers, employee workstations, telecommunication and video conferencing equipment, and other equipment to support both current and anticipated levels of customer activities worldwide. In accordance with the Company's strategic acquisition plans, the Company evaluates, on an ongoing basis, potential acquisitions of companies or technologies that may complement its business. In order to support the Company's current and anticipated business growth, the Company obtained, in June 1998, a commitment from The Chase Manhattan Bank ("Chase") to provide a $50.0 million unsecured senior revolving credit facility (the "Facility") through a syndication arrangement. The Facility, which is expected to be in place by August 31, 1998, expires three years from its closing date and replaces the Company's previously maintained $20.0 million revolving credit facility that expired on June 30, 1998. The Facility will be administered by Chase and will carry a commitment fee, payable quarterly in arrears, calculated based on the unused portion of the Facility and a price grid as set forth in the credit agreement currently under negotiation with Chase. The Facility will permit the Company to elect any of three possible interest rate formulas as defined in the credit agreement. Interest will be payable in arrears based on an interest period determined by the interest rate elected by the Company. The Facility 13 will require, among other things, the Company to maintain certain financial ratios, including debt service coverage, debt to capital, and net worth. At June 30, 1998 and December 31, 1997, the Company had no balance outstanding under its revolving credit facility. In the first quarter of 1998, the Company repaid the outstanding principal balance of approximately $823,000 under a loan agreement entered into by Peter Chadwick to finance the purchase of a training facility located in the United Kingdom. This loan agreement was then terminated. (see Note C of the Notes to the Consolidated Financial Statements). In January 1998, the Company entered into an agreement with Boston Properties Limited Partnership ("Boston Properties") to lease a building to be constructed and developed by Boston Properties. This approximately 177,000 square foot building, which is located in Cambridge, Massachusetts, will house the Company's Northeast operations, new employee training facility, and corporate departments. The lease agreement is for a ten-year period, which is expected to commence in June 1999. Pursuant to the terms of the lease agreement, the Company paid a $1.3 million security deposit in January 1998. The Company's current building is expected either to continue to be used for project development and other activities or subleased through its remaining lease term. The Company expects that cash flows from operations will provide the principal source of future liquidity for the Company. However, the Company is currently experiencing a period of growth, which could place a strain on the Company's financial resources. The Company currently anticipates that existing cash and investment balances combined with cash generated from operations and amounts available under the Facility will be sufficient, at least through 1999, to meet the Company's working capital requirements and to fund the expansion of the Company's business. In order to meet client demand for the Company's services in 1998, the Company expects to continue to increase its professional staff and to open additional sales and operations offices in North America and internationally. Although the Company's plans to open offices and hire personnel are in response to increased demand for the Company's services, a portion of these expenses will be incurred in anticipation of increased demand. Operating results and liquidity may be adversely affected if market demand and revenues do not increase as anticipated. As the Company expands its international operations, a number of factors, including market acceptance of the Company's services, significant fluctuations in currency exchange rates, and changes in general economic, political, and regulatory conditions, could also adversely affect future results and liquidity. 14 NEW ACCOUNTING PRONOUNCEMENTS In March 1998, Statement of Position 98-1, "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use," was issued (see Note G of Notes to Consolidated Financial Statements). In July 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," which is effective for fiscal years beginning after December 15, 1997. Interim reporting disclosures are not required in the first year of adoption (see Note G of Notes to Consolidated Financial Statements). In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company) (see Note G of Notes to Consolidated Financial Statements). FORWARD-LOOKING STATEMENTS This Form 10-Q includes forward-looking statements (statements that are not historical facts) such as statements about future net revenues and profits, capital expenditures, liquidity sources and needs, working capital needs, increases in personnel and related costs, opening additional offices, and project personnel costs, general and administrative expenses, sales and marketing expenses, and other costs as a percentage of net revenues. These forward-looking statements are subject to several risks and uncertainties and the Company's actual future results may differ significantly from those stated in any forward-looking statements. While it is impossible to identify each factor and event that could affect the Company's results, variations in the Company's revenues and operating results occur from time to time as a result of a number of factors, such as the significance of client engagements commenced and completed during the period, the number of working days in a period, employee hiring, retention, and utilization rates, acceptance and profitability of the Company's services in new territories, and integration of companies acquired. The timing of revenues is difficult to forecast because the Company's sales cycle is relatively long in the case of new clients and may depend on factors such as the size and scope of the assignments and general economic conditions. Because a high percentage of the Company's expenses are relatively fixed, a variation in the timing of the initiation or the completion of client assignments, particularly at or near the end of any quarter, can cause significant variations in operating results from period to period. 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- (a) The annual meeting of stockholders was held on May 13, 1998. (b) Not applicable. (c) A vote was proposed to: (1) elect a Board of Directors to serve for the ensuing year; (2) amend the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock, par value $.01 per share (the "Common Stock"), from 120,000,000 shares to 250,000,000 shares; (3) amend the Company's 1991 Stock Option Plan (the "1991 Plan") to increase the number of shares of Common Stock available for issuance under the 1991 Plan by 4,000,000 shares; and (4) ratify the selection of the firm of Coopers & Lybrand L.L.P. as independent accountants for the fiscal year ending December 31, 1998. The voting results were as follows:
Votes Withheld Votes Broker Votes for Against Authority Abstained Non-votes ------------------------------------------------------------------------------- (1) James K. Sims 47,901,844 N/A 1,686,582 N/A - Warren V. Musser 47,518,362 N/A 2,070,064 N/A - Robert E. Keith, Jr. 47,941,282 N/A 1,647,144 N/A - Jack L. Messman 47,908,432 N/A 1,679,994 N/A - John W. Poduska, Sr., Ph.D. 47,526,210 N/A 2,062,216 N/A - James I. Cash, Jr., Ph.D. 47,904,232 N/A 1,684,194 N/A - James D. Robinson, III 47,901,757 N/A 1,686,669 N/A - (2) Increase in authorized shares of Common Stock 47,079,081 2,308,946 - 146,631 53,768 (3) Increase in number of shares under the 1991 Plan 26,885,802 19,022,787 - 166,259 3,513,578 (4) Coopers & Lybrand L.L.P. 49,534,453 17,193 - 36,780 - (d) Not applicable.
ITEM 5. OTHER INFORMATION - ------- ----------------- Proposals of stockholders intended for inclusion in the proxy statement to be furnished to all stockholders entitled to vote at the next annual meeting of the Company's stockholders must be received at the Company's principal executive offices no later than December 5, 1998. Proposals of stockholders to be made at the next annual meeting of the Company's stockholders must be delivered to the Company in accordance with the timing and procedural requirements set forth in the Company's Amended and Restated By-laws, a copy of which have been filed with the Securities and Exchange Commission and are incorporated by reference as an exhibit to this Form 10-Q. 16 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- (a) Exhibits: 3.1 Amended and Restated Certificate of Incorporation of the Company, as amended. 3.2(1) Amended and Restated By-laws of the Company. 4(2) Rights Agreement dated June 23, 1997 between the Company and ChaseMellon Shareholders Services, LLC. 11.1 Statement Regarding Computation of Per Share Earnings. 27 Financial Data Schedule. (1) Incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 (File No. 33-56338). (2) Incorporated herein by reference to Exhibit 4.1 to the Company's Report on Form 8-K dated June 23, 1997, and filed on July 1, 1997. (b) There were no reports on Form 8-K filed for the quarter ended June 30, 1998. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. Date: August 13, 1998 By: /s/ Arthur M. Toscanini ------------------------ Arthur M. Toscanini Executive Vice President and Chief Financial Officer 18 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 3.1 Amended and Restated Certificate of Incorporation of the Company, as amended. 3.2 Amended and Restated By-laws of the Company (1). 4 Rights Agreement dated June 23, 1997 between the Company and ChaseMellon Shareholders Services, LLC (2). 11.1 Statement Regarding Computation of Per Share Earnings. 27 Financial Data Schedule. - ------------------------------ (1) Incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 (File No. 33-56338). (2) Incorporated herein by reference to Exhibit 4.1 to the Company's Report on Form 8-K dated June 23, 1997, and filed on July 1, 1997. 19 EX-3.1 2 AMENDED & RESTATED CERT. OF INCORPORATION EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CTP, INC. (Incorporated March 13, 1991) * * * * * * I, James K. Sims, President of CTP, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, do hereby certify that the Certificate of Incorporation of CTP, Inc., as amended, has been further amended, and restated as amended, in accordance with provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware, and, as amended and restated, is set forth in its entirety as follows: FIRST. The name of the Corporation is CTP, Inc. SECOND. The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue shall be 32,000,000 shares, consisting of 30,000,000 shares of Common Stock with a par value of $.01 per share (the "Common Stock") and 2,000,000 shares of Preferred Stock with a par value of $.01 per share (the "Preferred Stock"). A description of the respective classes of stock and a statement of the designations, powers, preferences and rights, and the qualifications, limitations and restrictions of the Preferred Stock and Common Stock are as follows: A. COMMON STOCK ------------ 1. General. All shares of Common Stock will be identical and will entitle ------- the holders thereof to the same rights, powers -2- and privileges. The rights, powers and privileges of the holders of the Common Stock are subject to and qualified by the rights of holders of the Preferred Stock. 2. Dividends. Dividends may be declared and paid on the Common Stock from --------- funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock. 3. Dissolution, Liquidation or Winding Up. In the event of any -------------------------------------- dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, each issued and outstanding share of Common Stock shall entitle the holder thereof to receive an equal portion of the net assets of the Corporation available for distribution to the holders of Common Stock, subject to any preferential rights of any then outstanding Preferred Stock. 4. Voting Rights. Except as otherwise required by law or this Amended ------------- and Restated Certificate of Incorporation, each holder of Common Stock shall have one vote in respect of each share of stock held by him of record on the books of the Corporation for the election of directors and on all matters submitted to a vote of stockholders of the Corporation. Except as otherwise required by law or provided herein, holders of Common Stock will vote together with holders of the Preferred Stock as a single class, subject to any special or preferential voting rights of any then outstanding Preferred Stock. There shall be no cumulative voting. B. PREFERRED STOCK --------------- The Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Board of Directors of the Corporation may determine. Each series shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. Except as otherwise provided in this Amended and Restated Certificate of Incorporation, different series of Preferred Stock shall not be construed to constitute different classes of shares for the purpose of voting by classes. The Board of Directors is expressly authorized to provide for the issuance of all or any shares of the undesignated Preferred Stock in one or more series, each with such designations, preferences, voting powers (or special, preferential or no voting powers), relative, participating, optional or other special rights and privileges and such qualifications, limitations or restrictions thereof as shall be stated in the resolution or resolutions adopted by the Board of Directors to create such series, and a certificate or said resolution or resolutions (a "Certificate of Designation") shall be filed in accordance with -3- the General Corporation Law of the State of Delaware. The authority of the Board of Directors with respect to each such series shall include, without limitation of the foregoing, the right to provide that the shares of each such series may be: (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock of the Corporation at such price or prices or at such rates of exchange and with such adjustments, if any; (v) entitled to the benefit of such limitations, if any, on the issuance of additional shares of such series or shares of any other series of Preferred Stock; or (vi) entitled to such other preferences, powers, qualifications, rights and privileges, all as the Board of Directors may deem advisable and as are not inconsistent with law and the provisions of this Amended and Restated Certificate of Incorporation. FIFTH. The Corporation is to have perpetual existence. SIXTH. 1. Management. The business and affairs of the Corporation shall be ---------- managed by or under the direction of the Board of Directors of the Corporation. 2. By-laws. The Board of Directors of the Corporation is expressly ------- authorized to adopt, amend or repeal the By-laws of the Corporation, subject to any limitation thereof contained in the By-laws. The stockholders shall also have the power to adopt, amend or repeal the By-laws of the Corporation. 3. Books. The books of the Corporation may be kept at such place ----- within or without the State of Delaware as the By-laws of the Corporation may provide or as may be designated from time to time by the Board of Directors of the Corporation. SEVENTH. 1. Number of Directors. The number of directors which shall constitute ------------------- the whole Board of Directors shall be determined by resolution of a majority of the Board of Directors, but in no event shall the number of directors be less than three. The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation or removal of one or more directors. The directors shall be elected at the annual meeting of stockholders by such -4- stockholders as have the right to vote on such election. Directors need not be stockholders of the Corporation. 2. Election of Directors. Elections of directors need not be by written --------------------- ballot except as and to the extent provided in the By-laws of the Corporation. 3. Terms of Office. Each director shall serve for a term ending on the --------------- date of the annual meeting following the annual meeting at which such director was elected. 4. Tenure. Notwithstanding any provisions to the contrary contained ------ herein, each director shall hold office until his successor is elected and qualified, or until his earlier death, resignation or removal. 5. Vacancies. Any vacancy in the Board of Directors, however occurring, --------- including a vacancy resulting from an enlargement of the Board of Directors, may be filled only by vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, if applicable, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until his successor is elected and qualified, or until his earlier death, resignation or removal. 6. Quorum. A majority of the total number of the whole Board of ------ Directors shall constitute a quorum at all meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. 7. Action at Meeting. At any meeting of the Board of Directors at which ----------------- a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law or the Corporation's Amended and Restated Certificate of Incorporation or By-laws. 8. Rights of Preferred Stock. The provisions of this Article are subject ------------------------- to the rights of the holders of any series of Preferred Stock from time to time outstanding. EIGHTH. No director (including any advisory director) of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing -5- such liability; provided, however, that, to the extent provided by applicable law, this provision shall not eliminate the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment to repeal. NINTH. 1. Actions, Suits, and Proceedings Other than by or in the Right of the -------------------------------------------------------------------- Corporation. The Corporation shall indemnify each person who was or is a party - ----------- or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation , as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, and no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgement, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a ---- ---------- presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action proceeding, had reasonable cause to believe that his conduct was unlawful. Notwithstanding anything to the contrary in this Article, except as set forth in Section 6 below, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof), initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. -6- 2. Actions or Suits by or in the Right of the Corporation. The ------------------------------------------------------ Corporation shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses (including attorneys' fees) which the Court of Chancery of Delaware or such other court shall deem proper. 3. Indemnification for Expenses of Successful Party. Notwithstanding the ------------------------------------------------ other provisions of this Article, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the ---- ---------- Indemnitee did not act in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purpose hereof to have been wholly successful with respect thereto. -7- 4. Notification and Defense of Claim. As a condition precedent to his --------------------------------- right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 4. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. 5. Advance of Expenses. Subject to the provisions of Section 6 below, in ------------------- the event that the Corporation does not assume the defense pursuant to Section 4 of this Article of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article, any expenses (including attorneys' fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter, provided, -------- however, that the payment of such expenses incurred by an Indemnitee in advance - ------- of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of, such person to make such repayment. 6. Procedure for Indemnification. In order to obtain indemnification or ----------------------------- advancement of expenses pursuant to Section 1, -8- 2, 3 or 5 of this Article, the Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the Corporation determines, by clear and convincing evidence, within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance by (a) a majority vote of a quorum of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question ("disinterested directors"), (b) if no such quorum is obtainable, a majority vote of a committee of two or more disinterested directors, (c) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, (d) independent legal counsel (who may be regular legal counsel to the Corporation), or (e) a court of competent jurisdiction. 7. Remedies. The right to Indemnification or advances as granted by this -------- Article shall be enforceable by the Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 6. Unless otherwise provided by law, the burden of proving that the Indemnitee is not entitled to indemnification or advancement of expenses under this Article shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitee's expenses (including attorneys' fees) incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation. 8. Subsequent Amendment. No amendment, termination or repeal of this -------------------- Article or of the relevant provisions of the General Corporation Law of the State of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation -9- arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal. 9. OTHER RIGHTS. The indemnification and advancement of expenses provided ------------ by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article. 10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any ----------------------- provision of this Article to indemnification by the Corporation for some or a portion of the expenses (including attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled. 11. INSURANCE. The Corporation may purchase and maintain insurance, at its --------- expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. 12. MERGER OR CONSOLIDATION. If the Corporation is merged into or ----------------------- consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising -10- out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation. 13. Savings Clause. If this Article or any portion hereof shall be -------------- invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by an applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. 14. Definitions. Terms used herein and defined in Section 145(h) and ----------- Section 145(i) of the General Corporation Law of the State of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i). 15. Subsequent Legislation. If the General Corporation Law of the State of ----------------------- Delaware is amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. TENTH. The Corporation reserves the right to amend or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation. IN WITNESS WHEREOF, the undersigned has hereunto signed his name and affirms that the statements made in this Amended and Restated Certificate of Incorporation are true under the penalties of perjury this 21st day of Dec., 1992. /s/ James K. Sims ------------------------------ James K. Sims, President Attest: /s/ Arthur M. Toscanini - ----------------------------- Arthur M. Toscanini, Secretary CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CTP, INC. CTP, Inc. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows, pursuant to Section 242 of the General Corporation Law of Delaware: 1. That the Board of Directors of CTP, Inc., at a meeting held on December 17, 1992, duly adopted resolutions in accordance with Section 242 of the General Corporation Law of the State of Delaware (i) proposing amendment of the Certificate of Incorporation of the Corporation subject to the approval of the shareholders of the Corporation, (ii) declaring such amendment to be advisable and in the best interests of the Corporation, (iii) directing that such amendment be submitted to and be considered by written consent action of the shareholders of the Corporation. The resolution setting forth the amendment is as follows: RESOLVED: That the Board of Directors of the Corporation deems it advisable and in the best interests of the Corporation and its stockholders that the Certificate of Incorporation of the Corporation, as amended and restated, be further amended by deleting Article FIRST thereof in its entirety and inserting the following in substitution therefor: "FIRST. The name of the Corporation is Cambridge Technology Partners (Massachusetts), Inc." -2- 2. This Certificate of Amendment of Certificate of Incorporation was duly adopted by written consent of the shareholders holding a majority of the outstanding capital stock of the Corporation in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware, and written notice of the adoption of the Certificate of Amendment of Certificate of Incorporation has been given as provided by Section 328 (d) of the General Corporation Law of the State of Delaware to every shareholder entitled to such notice. IN WITNESS WHEREOF, CTP, Inc. has caused this Certificate of Amendment of Certificate of Incorporation to be signed by James K. Sims, its President, and attested by Arthur M. Toscanini, its Assistant Secretary, this 11th day of February, 1993. CTP, Inc. By: /s/ James K. Sims ------------------------------------ James K. Sims, President ATTEST: BY: /s/ Arthur M. Toscanini ------------------------------------ Arthur M. Toscanini, Secretary CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED OFFICE AND OF REGISTERED AGENT It is hereby certified that: 1. The name of the corporation (hereinafter called the "corporation") is Cambridge Technology Partners (Massachusetts), Inc. 2. The registered office of the corporation within the State of Delaware is hereby changed to 32 Loockerman Square, Suite L-100, City of Dover, County of Kent. 3. The registered agent of the corporation within the State of Delaware is hereby changed to The Prentice-Hall Corporation System, Inc., the business office of which is identical with the registered office of the corporation as hereby changed. 4. The corporation has authorized the changes hereinbefore set forth by resolution of its Board of Directors. Signed on May 26 , 1993. /s/ James K. Sims ----------------------------------- President /s/ Arthur M. Toscanini - ------------------------------------ Secretary CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. Cambridge Technology Partners (Massachusetts), Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows, pursuant to Section 242 of the General Corporation Law of Delaware: FIRST: That the Board of Directors of said Corporation, at a meeting held on December 14, 1995, duly adopted resolutions in accordance with Section 242 of the General Corporation Law of the Sate of Delaware, (i) proposing amendment to the Certificate of Incorporation of the Corporation, (ii) declaring such amendment to be advisable and in the best interests of the Corporation, (iii) directing that such amendment be submitted to the stockholders of the Corporation for approval thereby. The resolutions setting forth the amendment and directing that such amendment be submitted to the stockholders are as follows: RESOLVED: That, subject to stockholder approval, the Board of Directors of the Corporation has determined that it is advisable and in the best interests of all of the Corporation's stockholders to increase the authorized capital stock of this Corporation from 30,000,000 shares of Common Stock, $0.01 par value per share, to 120,000,000 shares; that such increase be considered at the next annual meeting of the stockholders, that in order to effect said increase the proper officers of this Corporation are hereby authorized and directed to prepare, execute and file with the Secretary of State of the State of Delaware an appropriate Certificate of Amendment to the Certificate of Incorporation of this Corporation; and that the Board of Directors is hereby authorized to issue all or any part of the authorized but unissued capital stock of this Corporation at such times, to such persons, upon such terms, and for such consideration as the Board may in its discretion determine. RESOLVED: That the increase in the authorized capital stock of this Corporation be submitted to the stockholders of the Corporation for their consideration and approval. -2- SECOND: This Certificate of Amendment of Certificate of Incorporation was duly adopted at the Annual Meeting of Stockholders of the Corporation held May 15, 1996, in accordance with Section 242 of the General Corporation Law of the State of Delaware. THIRD: That in accordance with the aforementioned resolution, the Amended and Restated Certificate of Incorporation of this Corporation is hereby amended by deleting the first sentence of Article FOURTH thereof in its entirety and replacing it with a new sentence so that, as amended, the first sentence of Article FOURTH shall read as follows: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue shall be One Hundred Twenty- Two Million (122,000,000) shares, consisting of 120,000,000 shares of Common Stock with a par value of $.01 per share (the "Common Stock") and 2,000,000 shares of Preferred Stock with a par value of $.01 per share (the "Preferred Stock"). FOURTH: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Cambridge Technology Partners (Massachusetts), Inc., has caused this certificate to be signed by James K. Sims, its President, and attested by Arthur M. Toscanini, its Assistant Secretary, as of this 15th day of May, 1996. CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. By: /s/ James K. Sims ------------------------------ James K. Sims, President ATTEST: By: /s/ Arthur M. Toscanini ------------------------------- Arthur M. Toscanini, Assistant Secretary CERTIFICATE OF DESIGNATIONS SERIES A JUNIOR PARTICIPATING PREFERRED STOCK ------------------- ($0.01 Par Value) of CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. ------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware ____________________ Cambridge Technology Partners (Massachusetts), Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY: FIRST: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors of the Corporation adopted the following resolutions creating a series of 100,000 shares of Preferred Stock, $0.01 par value per share, designated as Series A Junior Participating Preferred Stock: RESOLVED: That pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of Article FOURTH, Section B, of its Certificate of Incorporation, a series of Preferred Stock of the Corporation (the "Series A Junior Participating Preferred Stock") be, and it hereby is, created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of the Series A Junior Participating Preferred Stock, and the qualifications, limitations or restrictions thereof, shall be as set forth in Appendix A attached hereto. ---------- RESOLVED: That the President, Chief Financial Officer or any Vice President and the Secretary or any Assistant Secretary of the Corporation be, and they hereby are, authorized and directed, in the name and on behalf of the Corporation, to file the Certificate of Designations in accordance with the provisions of Delaware General Corporation Law and to take such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution. SECOND: That the aforesaid resolutions were duly and validly adopted in accordance with the applicable provisions of Section 151 of the General Corporation Law of the State of Delaware and the Certificate of Incorporation and By-Laws of the Corporation. THIRD: That the aforesaid designation shall become effective on July 3, 1997. IN WITNESS WHEREOF, said Cambridge Technology Partners (Massachusetts), Inc. has caused this Certificate to be executed, this 23rd day of June, 1997. CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. By: /s/ Arthur M. Toscanini ------------------------ Name: Arthur M. Toscanini ------------------------ Title: Executive Vice President ------------------------ -1- Appendix A ---------- Section 1. Designation and Amount. The shares of such series shall ---------------------- be designated as "Series A Junior Participating Preferred Stock" and the number of shares constituting such series shall be 100,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, -------- however, that no decrease shall reduce the number of shares of Series A Junior - ------- Participating Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Junior Participating Preferred Stock. Section 2. Dividends and Distributions. --------------------------- (A) Subject to the rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock, in preference to the holders of Common Stock, $.01 par value per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds of the Corporation legally available for the payment of dividends, quarterly dividends payable in cash on January 31, April 30, July 31 and October 31 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision, combination or consolidation of the outstanding Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock) and the Corporation shall pay such dividend or distribution on the Series A Junior Participating Preferred Stock before the dividend or distribution declared on the Common Stock is paid or set apart; provided, however, that, in the event no dividend or -------- ------- distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. -2- (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share- by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Junior ------------- Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision, combination of consolidation of the outstanding Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, by law, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, the holders of shares of Series A Junior Participating Preferred Stock, the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. -3- (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior ---- ----- Participating Preferred Stock. (iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, the calling of special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the Chairman of the Board or the President, of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 10 days and not later than 60 days after such order or request. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation or by-laws irrespective of any increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or -4- bylaws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, or as otherwise provided by law, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. -------------------- (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on or make any other distributions on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Junior ----------------- Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of -5- Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any -------------------------------------- liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $1,000.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (D) Neither the consolidation, merger or other business combination of the Corporation with or into any other corporation nor the sale, lease, exchange or conveyance of all or any part of the property, assets or business of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 6. Section 7. Consolidation, Merger, etc. In case the Corporation shall -------------------------- enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly -6- exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Junior Participating ------------- Preferred Stock shall not be redeemable. Section 9. Ranking. The Series A Junior Participating Preferred Stock shall ------- rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Amendment. The Certificate of Incorporation of the Corporation --------- shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least seventy-five percent of the outstanding shares of Series A Junior Participating Preferred Stock, voting together as a single class. Section 11. Fractional Shares. Series A Junior Participating Preferred Stock ----------------- may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, said Cambridge Technology Partners (Massachusetts), Inc., has caused this Certificate to be executed, this 23rd day of June, 1997. CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. By: /s/ Arthur M. Toscanini ------------------------------------- Name: Arthur M. Toscanini ----------------------------------- Title: Executive Vice President ---------------------------------- CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. Cambridge Technology Partners (Massachusetts), Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows, pursuant to Section 242 of the General Corporation Law of the State of Delaware: FIRST: That the Board of Directors of said Corporation, at a meeting held on March 23, 1998 duly adopted resolutions in accordance with Section 242 of the General Corporation Law of the State of Delaware (i) proposing amendment to the Certificate of Incorporation of the Corporation, (ii) declaring such amendment to be advisable and in the best interests of the Corporation's stockholders and (iii) directing that such amendment be submitted to the stockholders of the Corporation for approval thereby. The resolutions setting forth the amendment and directing that such amendment be submitted to the stockholders are as follows: RESOLVED: That, subject to stockholders approval, the Board of Directors of the Corporation has determined it is advisable and in the best interests of all of the Corporation's stockholders to increase the number of authorized shares of Common Stock of the Corporation from 120,000,000 shares to 250,000,000 shares; that such increase be considered at the Annual Meeting; that in order to effect said increase the proper officers of the Corporation are hereby authorized and directed to prepare, execute and file with the Secretary of State of the State of Delaware an appropriate Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Corporation; and that the Board of Directors is hereby authorized to issue all or any part of the authorized but unissued capital stock of this Corporation at such times, to such persons, upon such terms, and for such consideration as the Board may in its discretion determine. RESOLVED: That the increase in the number of authorized shares of Common Stock of the Corporation be submitted to the stockholders of the Corporation at the Annual Meeting for their consideration and approval. -2- SECOND: The amendment to the Amended and Restated Certificate of Incorporation of the Corporation was duly adopted at the Annual Meeting of Stockholders of the Corporation held on May 13, 1998, in accordance with Section 242 of the General Corporation Law of the State of Delaware. THIRD: That in accordance with the aforementioned resolution, the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended by deleting the first sentence of Article FOURTH thereof in its entirety and replacing it with a new sentence so that, as amended, the first sentence of Article FOURTH shall read as follows: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue shall be Two Hundred Fifty Two Million (252,000,000) shares, consisting of Two Hundred Fifty Million (250,000,000) shares of Common Stock with a par value of $.01 per share (the "Common Stock") and Two Million (2,000,000) shares of Preferred Stock with a par value of $.01 per share (the "Preferred Stock"). FOURTH: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. -3- IN WITNESS WHEREOF, Cambridge Technology Partners (Massachuetts), Inc., has caused this certificate to be signed by James P. O'Hare, its Secretary, as of this 29th day of May, 1998. CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUETTS), INC. By: /s/ James P. O'Hare --------------------------- James P. O'Hare Secretary EX-11.1 3 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11.1 CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE (in thousands except per share data) (unaudited)
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 1998 1997 1998 1997 ------ ------ ------ ------ Net income $13,565 $ 9,121 $25,639 $17,075 ======= ======= ======= ======= Basic: Weighted average common shares outstanding 56,306 52,544 55,901 52,274 ======= ======= ======= ======= Net income per share $ .24 $ .17 $ .46 $ .32 ======= ======= ======= ======= Diluted: Weighted average common shares outstanding 56,306 52,544 55,901 52,274 Dilutive effects of stock options and warrants 5,417 5,535 5,433 5,734 ------- ------- ------- ------- Weighted average common and common equivalent shares outstanding 61,723 58,079 61,334 58,008 ======= ======= ======= ======= Net income per share $ .22 $ .16 $ .42 $ .30 ======= ======= ======= =======
EX-27 4 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1998 JUN-30-1998 51,683 21,712 137,689 3,486 0 254,934 67,958 25,983 305,102 102,413 0 0 0 566 200,975 305,102 0 279,816 0 238,018 (1,016) 559 83 42,731 17,092 25,639 0 0 0 25,639 0.46 0.42
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